SEC Grants Temporary Relief for Onchain Trading of Tokenized U.S. Stocks

The U.S. Securities and Exchange Commission (SEC) has granted temporary, conditional regulatory relief to platforms seeking to trade tokenized U.S. stocks on blockchain-based infrastructure.

The SEC announced the move on September 17, introducing what it calls the “Innovation Exemption.” The framework allows qualifying Tokenized Securities Venues (TSVs) to facilitate permissioned trading of certain tokenized National Market System (NMS) stocks through automated market makers (AMMs) and liquidity pools.

Under the new framework, TSVs can receive temporary relief from the Exchange Act’s definition of an “exchange,” while certain liquidity providers can also receive conditional relief from the definition of a “dealer.”

The arrangement is designed to give blockchain-based market infrastructure a regulated pathway for secondary trading of tokenized securities while the SEC gathers information and considers longer-term rules.

The exemption does not create a blanket approval for tokenized stock trading. Participating venues must meet a number of conditions set by the SEC.

For example, tokenized stocks traded through a TSV must provide holders with the same rights and privileges as the equivalent traditional shares. The venues must also operate within limits on the number of eligible stocks and trading volumes.

Where a tokenized stock is created by an unaffiliated third party, the venue must notify the underlying company’s issuer and give it an opportunity to object before making the token available for trading.

The SEC also requires smart contracts used by TSVs to be auditable and public, while the underlying stock’s trading status must be respected. If trading in the traditional stock is halted on its primary exchange, trading of its tokenized version on the TSV must also stop.

The relief is temporary and is scheduled to expire five years after publication. The SEC has also requested public comments on the framework and possible changes that could shape future regulation of tokenized securities markets.

The SEC described the move as an opportunity to bring capital markets into the digital age while allowing regulators to observe how onchain trading venues operate under controlled conditions.

For the broader crypto and financial markets, the decision creates a formal U.S. regulatory pathway for using blockchain-based infrastructure to trade certain real-world equities. It also gives the SEC a way to collect market data and assess whether additional rules are needed for tokenized securities in the future.

The development could become an important step in the growing convergence between traditional financial markets and blockchain technology, particularly as financial firms and crypto platforms explore tokenized versions of stocks and other real-world assets.